Vaiva Petrikaite, Institute of Economic Analysis (Barcelona)
“Search Choice, Pricing and Obfuscation”. Job Market Seminar.
The paper studies a costly consumer search market with horizontally differentiated products in which consumers may buy goods without inspecting them. A customer rationally decides on the order in which she considers products, and if it is worth searching a good before buying it. With mass market products, consumers always consider cheaper products first. However if firms sell niche market products, the consumers often consider more expensive products first. When search costs are high, firms adjust their prices in a way that consumers do not have incentives to search before purchasing. The fact that a consumer may buy a good without inspecting it creates incentives for firms to obfuscate by raising their search costs.
Contact person: Peter Norman Sørensen